U.S. jobless rate is a presidential concern

Last employment report before vote may influence who is ‘hired’

WASHINGTON (MarketWatch) — The last U.S. jobs report before the presidential election is sure to become a political football.

If job gains are much higher than expected in October or the unemployment rate remains below 8%, Democrats will cite the data as proof that President Barack Obama’s policies are working.

Yet if job creation is on the low side or the jobless rate jumps back to 8%, Republicans will say the report confirms that Obama has failed to delivery a badly needed economic recovery.

How much one report will sway voters is far from clear, but any edge matters in an election that appears to be neck and neck based on the latest polls. The vote takes place Tuesday.

The October report will be released Friday at 8:30 a.m. Eastern. The U.S. likely added 120,000 jobs last month and the unemployment rate edged up to 7.9% from 7.8%, according to the MarketWatch survey of economists.

While the unemployment rate draws the attention of politicians, Wall Street cares more about the actual number of job created. A figure that matches or exceeds the 120,000 forecast is likely to be viewed as further evidence that the economy continues to grow at a moderate pace.

A sharply lower number, however, would reignite worries the U.S. is slowing as the end of th year approaches. Some business leaders say they are reluctant to hire because of a potential budget crisis in Washington at the beginning of 2013, a threat whose resolution is uncertain because it’s unclear who will be elected president.

“The key story this summer has been that more and more businesses have moved to the sidelines, delaying key decisions on hiring and investment until after the election, when the policy outlook will be much clearer,” Stephen Stanley, chief economist of Pierpont Securities, said in a preview of the employment report.

That might partly explain the subdued pace of job creation so far in 2012. The economy has generated an average of 146,000 jobs in the first nine months of the year — the bulk of them created early on — down slightly from 150,000 in the same period a year earlier.

That’s more than enough new hires to keep pace with the natural increase in the working-age population, but it’s far too slow to dramatically reduce the nation’s unemployment rate.

Economists calculate the U.S. needs to add at least 250,000 jobs a month for several years to bring the jobless rate back down to 6% or less. That’s where unemployment stood before the severe 2007-2009 recession.

Despite the slow rate of hiring, the unemployment rate unexpectedly fell to 7.8% in September from 8.1% in August, the first time it’s been below 8% since Obama took office in January 2009. The news cheered Democrats and caused many conservatives to view the number with suspicion.

Economists of all stripes believe the government’s numbers are on the straight and narrow, but most suspect the sharp drop in unemployment in September was a fluke.

Keep in mind that the jobless rate is actually determined by one of two surveys the Labor Department used to compile the employment report.

One survey, which polls about 440,000 business establishments, is used to come up with the net increase in jobs each month. The so-called establishment survey is viewed by investors and economists as the most accurate assessment of labor-market trends.

The second part of the government’s report is based on a poll of about 60,000 households, aptly called the “household” survey. In September, the household survey showed a huge 873,000 gain in the number of people who said they found work that month, marking the biggest increase since 1983 and the second largest gain ever.

The October jobs report could show a partial reversal in household employment, economists say, pushing the unemployment rate higher.

Whether it’s enough to drive the jobless rate back above 8% — a late political gift for Mitt Romney just four days before the election — remains to be seen.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.